Prohibits certain provisions in insurance and HMO contracts that requires the insurer to include within the scope of the contract all covered groups of the insurer for access to the insurer's network of participating providers and other similar anticompetitive provisions.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A8169
SPONSOR: Cruz TITLE OF BILL:
An act to amend the insurance law and the public health law, in relation
to certain prohibited contract provisions
PURPOSE OR GENERAL IDEA OF BILL:
This bill, known as the Hospital Equity and Affordability Legislation
(HEAL Act), aims to improve market access and increase transparency of
health insurance contracts by banning certain anti-competitive
provisions
SUMMARY OF PROVISIONS:
Section one of the bill amends section 3217-b of the Insurance Law to
prohibit insurers from entering into contracts with certain anti-compet-
itive practices including:
* Requiring the insurer to include within the scope of the contract all
covered groups of the insurer, including groups or benefit funds that
contract with the insurer, or an affiliate of the insurer, for access to
the insurer's network of participating providers;
* Requiring an insurer to include all members of a provider system,
including medical practice groups and affiliated facilities, in its
network of participating providers;
* Restricting the ability of an insurer to create or modify a tiered
network benefit plan or requires an insurer to place all members of a
provider system, including medical practice groups and affiliated facil-
ities, in the same network tier or otherwise limits the right of an
insurer to place a provider in a particular tier; and
* Prohibiting insurers from using benefit designs, including wellness
programs and other benefits, to encourage members to seek services from
value-based health care providers. The bill would also prohibit the use
of most-favored-nation provisions and allow insurers to disclose price
and quality information regarding negotiated rates and other discounts
with health care providers.
Section two of the bill amends section 4406 of the Public Health Law to
make the same provisions for health maintenance organizations.
Section three sets the effective date.
JUSTIFICATION:
In recent years,• hospital consolidation has resulted in dominant
systems exercising anti-competitive market power. There have been a
number of hospital mergers and acquisitions, with big hospitals acquir-
ing smaller ones, along with physician practices. These hospital systems
reduce competition and have the market power to dictate price. While
these systems assert that the mergers will improve quality and reduce
costs, the data does not support that. Instead, they leverage their
market power to increase prices when they negotiate rates and contracts
with payers. And often these contracts include clauses that prohibit the
disclosure of prices. However, the landscape is changing. In Califor-
nia, a group of payers sued Sutter Health in a case that was joined by
the State Attorney General, They argued that Sutter engaged in anticom-
petitive practices that drove up healthcare prices in Northern Califor-
nia. In March 2021, a Superior Court of California judge granted prelim-
inary approval for a $575 million settlement, which also includes an
agreement by Sutter Health to end "all or nothing" contract provisions
requiring payers to contract with all Sutter hospitals if they wanted
access to any Sutter facility. In New York, there are similar highly
concentrated hospital markets. The recent public disputes between
payers and the large systems have highlighted the need for increased
transparency and visibility to the terms and conditions of such multi-
year agreements and how such agreements are contributing to rising
health care costs.
Large hospital systems that maintain robust provider networks are lever-
aging that market share during negotiations to restrict health insurance
network designs and access. The result of these anti-competitive negoti-
ation tactics is increased costs charged to insurance companies and
self-insured entities, which ultimately are passed on to consumers,
through premiums and cost-sharing.
Importantly, these agreements affect the networks for commercial lines
of business including HMO, PPO, individual, small group, large group,
self-insured benefit funds, the State of New York, the City of New York,
other municipalities, Medicaid, and Medicare Advantage. Several states
have enacted legislation to prevent such behavior or pursued antitrust
enforcement actions. The contract clauses that have raised the most
concern include:
* Most Favored Nation Clause: a guarantee that a buyer of goods or
services (i.e. a payer) receives terms from a seller (i.e. a hospital or
provider) that are at least as favorable as those provided to any other
buyer.
* All-or-nothing Clause: a requirement that a payer contract with all
facilities in a health system if they want to include any facilities in
the plan. Provider organizations typically use all-or-nothing provisions
to leverage the desirability of their must-have facilities to force
inclusion of lower performing facilities. Anti-tiering/Anti-steering
Clause: a contractual requirement that a payer place all physicians,
hospitals, and other facilities associated with a hospital system in the
most favorable tier of providers (i.e. anti-tiering) or at the lowest
cost-sharing rate to avoid steering patients away from that network
(i.e. anti-steering). Anti-Disclosure: a contractual provision that
prevents disclosure of certain contract terms.
Exclusive Contracting Clause: a contractual agreement in which a provid-
er prevents the payer from contracting with other competitive providers.
Under the umbrella of exclusive contracting are exclusive dealing
provisions and tying arrangements. This legislation would increase tran-
sparency and prohibit certain anti-competitive contracting behaviors
that drive up the cost of healthcare services.
PRIOR LEGISLATIVE HISTORY:
None
FISCAL IMPLICATIONS:
TBD
EFFECTIVE DATE:
This act shall take effect on January 1st, 2022.
STATE OF NEW YORK
________________________________________________________________________
8169
2021-2022 Regular Sessions
IN ASSEMBLY
July 7, 2021
___________
Introduced by M. of A. CRUZ -- read once and referred to the Committee
on Insurance
AN ACT to amend the insurance law and the public health law, in relation
to certain prohibited contract provisions
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 3217-b of the insurance law is amended by adding a
2 new subsection (m) to read as follows:
3 (m) (1) No insurer that offers a managed care product or a comprehen-
4 sive policy that utilizes a network of providers shall enter into a
5 contract, written policy, written procedure or agreement (hereinafter
6 and solely for purposes of this subsection collectively referred to as a
7 "contract") with any health care provider that:
8 (A) requires the insurer to include within the scope of the contract
9 all covered groups of the insurer, including groups or benefit funds
10 that contract with the insurer, or an affiliate of the insurer, for
11 access to the insurer's network of participating providers;
12 (B) requires an insurer to include all members of a provider system,
13 including medical practice groups and affiliated facilities, in its
14 network of participating providers;
15 (C) requires an insurer, or an affiliate of an insurer, to include all
16 members of a provider system, including medical practice groups and
17 affiliated facilities, in all products offered by the insurer or an
18 affiliate of the insurer;
19 (D) restricts the ability of an insurer to create or modify a tiered
20 network benefit plan or requires an insurer to place all members of a
21 provider system, including medical practice groups and affiliated facil-
22 ities, in the same network tier or otherwise limits the right of an
23 insurer to place a provider in a particular tier;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11774-01-1
A. 8169 2
1 (E) prohibits insurers from using benefit designs, including wellness
2 programs and other benefits, to encourage members to seek services from
3 value-based health care providers;
4 (F) contains a most-favored-nation provision; provided, however, noth-
5 ing in this section shall be construed to prohibit a health insurer and
6 a provider from negotiating payment rates and performance-based contract
7 terms that would result in the insurer receiving a rate that is as
8 favorable, or more favorable, than the rates negotiated between a health
9 care provider and another entity; or
10 (G) restricts the ability of the insurer to disclose price or quality
11 information, including the allowed amount, negotiated rates or
12 discounts, or any other claim-related financial obligations covered by
13 the provider contract to any enrollee, group or other entity receiving
14 health care services pursuant to the contract.
15 (2) Beginning January first, two thousand twenty-two, any contract,
16 written policy, written procedure or agreement that contains a clause
17 contrary to the provisions set forth in this section shall be null and
18 void; provided, however, the remaining clauses of the contract shall
19 remain in effect for the duration of the contract term.
20 § 2. Section 4406 of the public health law is amended by adding a new
21 subdivision 6 to read as follows:
22 6. (a) No health maintenance organization that offers a managed care
23 product or a comprehensive policy that utilizes a network of providers
24 shall enter into a contract, written policy, written procedure or agree-
25 ment with any health care provider that:
26 (i) requires the insurer to include within the scope of the contract
27 all covered groups of the insurer, including groups or benefit funds
28 that contract with the insurer, or an affiliate of the insurer, for
29 access to the insurer's network of participating providers;
30 (ii) requires an insurer to include all members of a provider system,
31 including medical practice groups and affiliated facilities, in its
32 network of participating providers;
33 (iii) requires an insurer, or an affiliate of an insurer, to include
34 all members of a provider system, including medical practice groups and
35 affiliated facilities, in all products offered by the insurer or an
36 affiliate of the insurer;
37 (iv) restricts the ability of an insurer to create or modify a tiered
38 network benefit plan or requires an insurer to place all members of a
39 provider system, including medical practice groups and affiliated facil-
40 ities, in the same network tier or otherwise limits the right of an
41 insurer to place a provider in a particular tier;
42 (v) prohibits insurers from using benefit designs, including wellness
43 programs and other benefits, to encourage members to seek services from
44 value-based health care providers;
45 (vi) contains a most-favored-nation provision; provided, however,
46 nothing in this section shall be construed to prohibit a health insurer
47 and a provider from negotiating payment rates and performance-based
48 contract terms that would result in the insurer receiving a rate that is
49 as favorable, or more favorable, than the rates negotiated between a
50 health care provider and another entity; or
51 (vii) restricts the ability of the insurer to disclose price or quali-
52 ty information, including the allowed amount, negotiated rates or
53 discounts, or any other claim-related financial obligations covered by
54 the provider contract to any enrollee, group or other entity receiving
55 health care services pursuant to the contract.
A. 8169 3
1 (b) After January first, two thousand twenty-two, any contract, writ-
2 ten policy, written procedure or agreement that contains a clause
3 contrary to the provisions set forth in this section shall be null and
4 void; provided, however, the remaining clauses of the contract shall
5 remain in effect for the duration of the contract term.
6 § 3. This act shall take effect January 1, 2022.
